Even those with only the most tangential interest in financial market correlations must have become a little sick of hearing about the link between stocks and the euro as 2011 bowed out.

The epitome of so-called ‘risk assets’, which rise when investors feel a bit better about the future, the EUR/USD pair and the S&P 500 index became very close friends indeed. They did everything together, to the point where their 60-day correlation reached a record high of 0.91 in November.

For the uninitiated, a correlation of one is exact, so this wasn’t far off.

However, things have changed since. We may only be three weeks into 2012, but that correlation has collapsed to 0.58, according to Morgan Stanley.

The one-month link has swung even more wildly. According to Bank of America Merrill Lynch, it is now -0.63 from +0.68 just a month ago.

In short, stocks have contrived to grind higher while the euro seems to have become something no one much wants, whatever their current appetite for risk.

One of the New Year’s most obvious market trends has been the decoupling of the EUR/USD pair from other markets with which it was closely correlated through 2011.

Last year, the euro was one of many ‘risk assets’ likely to rise when investors were feeling good about the future, along with equity and commodity currencies, such as the Canadian and Australian dollars.

However, whereas the rest are still moving in lock step, the euro has veered away.

Whatever else it was, 2011 was a year of high correlation, both within markets and across them.

With nerves shot to bits by the endless euro-zone debt crisis, jittery investors behaved with remarkable similarity, to the point where, in November, analysts at HSBC were moved to write that ‘everyone has the same position’.

A bit hyperbolic, that, maybe, but it had at least a whiff of truth. Certainly, the correlations between assets perceived as risky, such as equity and the euro, had forged on to record highs by the fall.

The nervous, whipsaw markets of 2011 have, of course, seen links within and across asset market rises, in many cases to record levels. The 60-day rolling correlation between EUR/USD and the S&P 500 index, for example, hit 0.85 on December 2. It has never been stronger in the life of the euro and, even if you go back to the pre-euro 1990s and use a synthetic basket of now-defunct currencies, it still hasn’t.

And as those correlations have risen, much of the year’s financial analysis and recommendation has quite properly been based around them. Market watchers and money managers have been full of clever ideas for your money in an atmosphere of rising correlation and the almighty, overarching risk trade.

It will require shrewd diplomacy, but U.K. Prime Minister David Cameron has an opportunity to make serious progress on an issue that has vexed leaders of his Conservative Party for generations: Britain’s relationship with Europe.

That opportunity has come courtesy of an unlikely source, the spiralling euro zone debt crisis. The crisis has led German Chancellor Angela Merkel to seek limited changes to the European Union treaty to allow tighter fiscal union between members of the euro zone. But before the treaty changes can happen, Ms. Merkel needs to win the support of all 27 EU members.

If she can count on the U.K.’s support, it will give her a powerful ally and will help her convince the other members of the EU to back the changes.

Mr. Cameron and Chancellor of the Exchequer George Osborne are in favor of greater fiscal integration between the 17 members of the euro zone, because they see it as an essential part of stemming the crisis and creating a stable currency bloc.

But they fear this greater union will result in the euro zone countries forming a caucus and locking the U.K., and the other nine EU members who are outside the euro zone, out of key decisions on the single market or on regulatory decisions.

There is now evidence that the euro zone debt crisis is not only spreading to banks, by undermining their ability to fund themselves, but to the major trading partners with the region.

In this case, that is China. And what is bad for China is definitely bad for the global economy. In fact, news of a slowdown in China will probably eclipse any of the good news coming out of the U.S.

U.S. growth may finally be picking up, but given that the economy is so closed, the positive impact on the global economy will take longer to feed through.

In the same vein, any negative impact on the U.S. economy from the euro zone crisis may be slower in showing through, even though U.S. banks could soon start to face funding pressure because of their exposure.

But, as recent data has been showing, the euro zone crisis is starting to have a fallout in China.

In its earlier phases, the euro zone’s debt crisis conformed to a fairly simple thesis: exacerbated rather than smoothed over by currency union, a long mismatch between the bloc’s strong northern core and its weak Mediterranean periphery was coming to a volcanic head.

This view displaced struggling Ireland and Portugal to the Med, of course, but no matter. We can’t have trivia such as geography getting in the way of the kind of simple model investors love.

Yield spreads on French government bonds over their German equivalents have blown out.

Investors seem to have taken fright at the risk the French government will lose its triple-A rating as it is forced to bail out its banks in response to Europe’s running sovereign-debt crisis. Spreads are now the highest they’ve been since the crisis in the exchange rate mechanism—the euro’s precursor—in the early 1990s.

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Certainly, investors are worried about how the recapitalization of French banks will pan out once Greece defaults on its obligations; now a matter of when and degree rather than if.

The recent Dexia bailout just gave a flavor of what is still to come, especially given French banks’ huge exposure to peripheral euro-zone debt, estimated at more than $650 billion at the end of last year.

For the French government to take on its banking sector’s obligations would be an enormous, if not crippling, burden. France already has a gross debt to GDP ratio of 87%, while the government’s deficit this year will approach 6%.

None of these numbers instills much confidence in investors.

But even without a systemic default across Europe, France is struggling to carry the burden of the proposed European Financial Stability Facility’s guarantees.

Investors are starting to strip out the theoretical guarantees provided to the EFSF by the euro zone’s periphery. After all, it’s an absurdity to argue that, say, Italy can insure Italian debt.

Deeper down, though, France faces another problem.

Like the periphery, France is one of the euro-zone’s importing countries. It is running a current-account deficit of 2.7% of GDP this year, a deficit that the IMF expects to remain at or above 2.5% during the five coming years.

Sony Ericsson, the Swedish-Japanese handset hybrid, reported third quarter figures on Friday, and despite the fact that in recent years it has shrunk to become a far smaller handset maker (its market share was 1.7% in the second quarter according to Gartner), it’s still something of an important report.

Sony Ericsson is first among handset makers to publish its earnings, so its figures will provide a gauge as to the performance of other, more important players.

And in that sense it’s worrisome to hear what the company’s outspoken chief executive Bert Nordberg had to say about the sentiment on the European market. Turns out that consumers in Europe have become increasingly wary as a result of the euro zone debt crisis. Sony Ericsson sales held up, mostly due to recent successes with its Xperia Arc and Arco models in Japan, but in sales in Europe dropped by a staggering 43%.

In an interview, Nordberg said the company’s now sees “clear signs” that consumer sentiment in Europe is weakening and consumers are waiting longer to upgrade their handsets. In an earlier Wall Street Journal interview Mr. Nordberg reminded us what more hesitant consumers means for handset makers. If consumers suddenly decide to wait another three months to purchase a new mobile phone, this represents a quarter’s worth of earnings down the drain.